The Spanish investor is in a honeymoon phase with the market. This is reflected in the confidence index prepared by JP Morgan Asset Management and published exclusively by EL PAÍS. This indicator, which reflects the confidence that savers have about the potential of equities six months ahead, rebounded strongly in the first quarter of 2024, reaching 3.89 points. This is one of the highest levels reached in the 17 years of creating the index and a substantial jump compared to the level at which it stood in the previous wave, 1.05 points. To the question of what the stock markets will do in next semester, 46.7% of investors are optimistic, that is, they believe it is “likely” or “very likely” that prices will appreciate in this period of time. This is a notable jump for this group, since in the last quarter of 2023 they only accounted for 35.9%. On the other hand, pessimists – who give a high chance of market declines – only make up 15.5% of the responses. The most lukewarm savers—they believe that stock market indices will remain at current levels within six months—make up 37.8% of the sample.
An injection of optimism
What accounts for such an improvement in confidence? There are several factors that have contributed to this optimism. On the one hand, the great stock market harvest of 2023, a year where the Ibex 35 had a profitability of close to 23%. Furthermore, and against all odds, the aggressive increases in interest rates by central banks to tame inflation did not derail the global economy. Growth, although lower than previous years, is still in positive territory. The relaxation of prices has led monetary organizations to stop the increase in the price of money. The market expects the first interest rate cuts to arrive this summer, which has also been a shot of optimism for investors. In fact, among the main reasons that savers give for trusting that the stock markets will continue to rise are “the existence of an improvement in the current situation”, “lowers in interest rates” and “price stability”. As was the case in the previous wave of the survey, there is no stock market that ranks as the clear favorite of Spanish investors. When asked which market will experience the greatest rise in the medium term, the most mentioned option is US equities (26.1% of responses), but closely followed by Spanish equities (24.4%) and European equities. (23.6%). The Asian and emerging market indices are quite far behind in preferences. This greater optimism among investors, however, is not reflected in their investment preferences. Looking ahead to the next semester, the majority of savers surveyed (42%) continue to affirm that they will purchase very conservative banking products (deposits, passbooks or interest-bearing accounts). The next favorite asset is investment funds, which are the main option for 21% of savers. In third place is public debt (bills and bonds), followed by direct investment in the Stock Market. On the contrary, pension plans (12.2%) mark their minimum.
Preference for risk assets
Expectations in the market, as in life, are very important. Investors have been preparing for a global recession that, so far, has not arrived. For this reason, every positive macroeconomic data, no matter how weak, has been received with uproar. For now, the horizon is clear. Or at least that's what Lucía Gutiérrez-Mellado claims. “Our base scenario is a soft landing. We believe that the world economy will slow down, but will continue to grow,” explains the head of strategy at JP Morgan Asset Management. In her analysis, she points out two drivers for activity: manufacturing activity and consumption. “The big unknown is China. The measures that are being applied to support the real estate sector are not yet being noticed.” The American manager's expert believes that the key factor continues to be inflation: in Europe the slowdown is more consistent than in the United States. And there we return to the game of expectations. “The market discounted rate cuts in the summer. We think that in Europe they will begin in June, but the Federal Reserve may delay them a little more and that they will not be as intense as was thought a few months ago.» With these wicks, the investment strategy that Gutiérrez-Mellado recommends is committed to risk assets, especially equities and the debt of lower quality companies, also known as junk bonds. Follow all the information from Economy and Business on Facebook and xor in our weekly newsletter
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